Cost Accounting Standards


Cost Accounting Standards are a set of 19 standards and rules promulgated by the United States Government for use in determining costs on negotiated procurements. CAS differs from the Federal Acquisition Regulation in that FAR applies to substantially all contractors, whereas CAS applies primarily to the larger ones.

History

In 1970, Congress established the original Cost Accounting Standards Board to promulgate cost accounting standards designed to achieve uniformity and consistency in the cost accounting principles followed by defense contractors and subcontractors in excess of $100,000, and to establish regulations to require defense contractors and subcontractors, as a condition of contracting, to disclose in writing their cost accounting practices, to follow the disclosed practices consistently and to comply with promulgated cost accounting standards.
After adopting 19 standards, the original CASB was dissolved on September 30, 1980; the standards, however, remained active and the CASB was revived in 1988 within the Office of Federal Procurement Policy. The current CASB consists of five members: the OFPP Administrator and one member from the United States Department of Defense, the General Services Administration, industry, and the private sector.

The Standards

The original CASB adopted 19 standards, numbered 401 through 420. The new CASB readopted the original 19 standards with only minor modifications, and has yet to adopt any new standards.
StandardTitle
401Consistency in Estimating, Accumulating and Reporting Cost
402Consistency in Allocating Costs Incurred for the Same Purpose
403Allocation of Home Office Expenses to Segments
404Capitalization of Tangible Assets
405Accounting for Unallowable Costs
406Cost Accounting Period
407Use of Standard Costs for Direct Material and Direct Labor
408Accounting for Costs of Compensated Personal Absence
409Depreciation of Tangible Capital Assets
410Allocation of Business Unit General and Administrative Expenses to Final Cost Objectives
411Accounting for Acquisition Costs of Material
412Composition and Measurement of Pension Costs
413Adjustment and Allocation of Pension Cost
414Cost of Money as an Element of the Cost of Facilities Capital
415Accounting for the Cost of Deferred Compensation
416Accounting for Insurance Cost
417Cost of Money as an Element of the Cost of Capital Assets Under Construction
418Allocation of Direct and Indirect Costs
419unused
420Accounting for Independent Research and Development Costs and Bid and Proposal Costs

CAS Applicability

CAS applies to contracts, not contractors, through Federal Acquisition Regulation clauses. A company may have contracts that are subject to "full" CAS coverage, "modified" CAS coverage, simultaneously have contracts that are subject to either modified or full coverage, or be exempt from coverage. However, a company under "full" coverage is not subject to a standard where it does not apply.
"Modified" coverage applies to contracts when a company receives a single CAS-covered award of US$7.5 million or more; this is known as the "Trigger" contract; modified coverage applies to all contracts that are not exempt from CAS until the company meets the criteria for "Full" coverage.
"Full" coverage applies when a company receives either one CAS-covered contract of US$50 million or more in the current accounting period, or, in the preceding cost accounting period, multiple CAS-covered contracts cumulatively totaling US$50 million. In addition to complying with all 19 standards, the company must also file a CAS Disclosure Statement, which spells out the company's accounting practices. There are two versions of the CAS Disclosure Statement: DS-1 applies to commercial companies while DS-2 applies to educational institutions.
In some instances, a contract may be exempt from CAS standards:
Previously, contracts where performance would have been performed entirely outside the United States were also exempt, but this exemption was removed for new contracts effective October 11, 2011.
Furthermore, in some instances even where a company is subject to a standard, different rules may apply within the standard itself as to what a company is required to do. As an example, under CAS 403, if Company A's "residual expenses" exceed a specified percentage of revenue, Company A must follow a dictated "three-factor" formula to allocate such expenses, but if Company B's residual expenses do not exceed the percentage, Company B may follow the formula but is not required to do so.

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